Reference Material

vagar11

Well-Known Member
#1
By Avny

http://www.traderji.com/day-trading/89395-master-one-trick-only.html

Breakout Pullback and Breakout Failure.


One set up failed and entry created for 2nd setup



My strategy for intraday trade

I am by nature an intraday trader,though i trade positional also,but my heart lays in intraday

REQIREMENTS

: 3M/5M (Chart W/O any indicator)

Addional req : quick fingers,alert mind,total concentration

TRADING INSTRUMENT : NF,BNF,scips with high vol and ATR

STRATEGY

for this strategy we require a support/resistence line/area,so we can take trade decision,based on price action around these line/area.

so, for support/resistence lines/area,i use,HIGH/LOW of first 3M/5M candle of the day

METHOD

1: concentrate only on two set up,
pull back and failed break out

2: wait for the price to break out either side of first candle

3: let the price come back to S/R line,(be alert,when price approaches the
S/R line)

PULLBACk
:A: let us assume the price gave a B/O,above the high of first
candle,then,
if price comes near to the S/R line and start reversing(in the
direction of break out),buy above the most recent bull candle,

STOPLOSS: is below the low of lowest bar prior to this bull
candle,or the low of this bull candle,if it is lowest,among the
recent candles

TARGET : it is a difficult part,there are so many variations of how and
where to, book profit,for simplicity i will tell what i was using initially book half the position at a predefined fix target and use TSL for the rest set the fix target as per your comfort,for me it was rs 1 for scrips upto rs300,rs 2,for scrips upto 500 and rs 5 for rest, 10 points for NF and 20 point for BNF



FAILED BREAKOUT

After breakout, if price comes back to S/R line,then either it pulls back,and
resume the pr direction,or it will break the S/R line and will carry on, negating the earlier break out.

ENTRY:entry is at the HIGH/low of the bar which closes ABOVE/ below the S/R
line

STOPLOSS: stoploss is above/below the pr pivot high/low

TARGET:as described earlier
 

vagar11

Well-Known Member
#2
Some trades by Avny







Explanation of a chart


A; breakout above 1st 5 min candle,there was a pullback but not near the line so no trade
B: price drop below the upper line,but went above the line immediately,a failed breakdown,will buy above the candle,which closed above the line,candle C,SL is below the low of this candle
1st target of rs 5 achieved at candle G,move SL to break even(which triggered at 5th candle after this candle)
as price went below the low of candle F(nearest swing low),our failed breakdown setup failed,so take short position below the low of candle F,SL above the high of candle G
as price approached to candle H,1st target of rs 5 achieved ,here shift SL either to break even or as price is reaching to lower end of 1st 5 min candle,u can shift the SL at the high of candle H(in any case it triggers)
candle Irice gave a break out,which failed at candle J,so initiate short position below the low of candle J,SL above the candle I
shift SL avobe the high of pin bar candle k,which triggered
as price are in a clear downtrend,one can go short again below the low of candle K with SL above of candle L
thanks
 

vagar11

Well-Known Member
#3
Some days can be like this.



from 10 trades shown in the chart,i got 129 points

using 2 lots,squaring 1st at fix 10 point profit and trailing 2nd with TSL (this strategy i, already mentioned in my earlier posts)

129 points may not be good enough for u
but i am happy with it

Nifty trades analysis,as per my strategy

1: failed B/OUT,short shoud be taken below
this candle,with SL above this candle,
but R:R is not favourable,SL is too far
away(>25 point),i do not take trade with SL
>15 points
2:big bull candle,which failed the earlier
set up,a long should have been taken,but big SL
prevented it.

4:it broke the support,wait for BOF or BOP or pullback

5,6:BOP and BOF set up,sell below candle 6,SL above this

7: last setup failed,buy at the high of candle 6,SL below
the low of candle 6
8: pin bar,with long upper shadow and in the area of
resistence,so exit as price breach the low of this pin bar
9:BOF set up,but R:R is not good,no trade
10: pull back and BOF setup,buy above the
high of next candle,SL below this candle
11:exit in resistence area

12:BOF setup,buy

13: exit below the pin bar as mkt is nearing its end




candle no:

1: B/O above 1st 3 min candle
2: B/O fail,sell below this,SL is above this candle,tgt 1 (10p)achieved at the next candle
3: pin bar,just below the support line,exit as price enters into the range at the next candle
4: break down fail,buy above this candle,1st target achieved
5: keep TSL below this candle
6: BOF,sell below this candle.SL above this candle
7: pr setup failed reverse the position,SL below this candle(1st tgt done)
8: reverse the positon,
9: BOP,buy above this candle,(1st tgt done,follow with TSL)
10: break down fail,buy above this(1st tgt done)
11: same as pr trade

 

vagar11

Well-Known Member
#6
'Metamorphosis' of an uptrend into a downtrend:
Prerequisites : an existing trend
1. In below example an "Uptrend" constituted by higher highs and higher lows.
2. Flattening of trend EMA showing weakening of trend.
3.A pivot forming below EMA (first stab at EMA usually fails)
4.This is followed by a 'Lower High' (most important thing), this formation should alert us about a probable trend reversal.
5.Short entry is triggered at the break of mpl that had formed below EMA.
6.Downtrend follows.

Below chart depicts change of trend from up to down using pivots and EMA20, no ERL is used here.



Vivek

No body can identify a trend change before it happens,predictors call trend change a dozen times before it happens and they are proved wrong every time.

Trend change can be of two types, one is v shape reversal or market gets horizontal losing angle of ascent or descent and after a period of consolidation or distribution the trend reverse.There is enough material on how to identify trend change,Subhdip is running a full thread,Saint had his thread,XRay has his support and resistance thread,I have discussed it many times in my threads....so I need not repeat the same what is already said several times.But trend knowledge is absolutely essential for trading success.

I always go by pivots and angle of the trend.

Smart_trade


I was in the thick of trading in 2007-8-9 period.These were the best years in my trading career. I had some very nasty losses but recovered from them quickly and on balance made good money in that period.

Any trader who has traded in that period knows the dangers of being against the trend and holding losing position in the hope that these will turn into profits...they don't,so we have to follow the trend and be positioned in the direction of the trend.It is my experience that market never makes a big move all of a sudden.(except natural calamities,wars etc) and it always gives trend change before making a large move.So only people who refuse to see the trend and who argue with the markets,lose big in such moves.

During that time no analyst had any clue as to why the market is falling...it is only at the end of the downtrend that the reasons such as Yen carry trade unwinding etc people started talking ...but most portion of the downtrend all were totally clueless.So the lesson is never argue with the market and try to impose our own wish and analysis on it.So if the trader is alert,such carnage is a great opportunity for making big money.

I am no superhuman, so I too take losses,.I too have periods of losing streaks ....all part of this wonderful game which I love playing .I have come to trading ,from a corporate career ,out of my own choice and love every moment of it.

Smart_trade
 

vagar11

Well-Known Member
#7
The Trading Process: Day Structure

In the first post from this series that describes how I trade, I emphasized the importance of understanding the market's context: whether current action is situated within strengthening, weakening, or stable conditions. The second post stressed the importance of identifying price levels as potential price targets for trade ideas.

The concept that unites these two ideas for me as a short-term trader is day structure. Each day has a particular structure to its price action and strength/weakness. Identifying the likely structure for the day as early as possible is perhaps the most important skill demanded of the intraday trader. I say this because you can be skilled at recognizing chart patterns or reading immediate supply or demand in the order book, but if you get day structure wrong, you can easily find yourself selling in a market that is ready to breakout to the upside or buying at the wrong time in a falling market.

Day structure, for me as an intraday trader, trumps longer timeframe trend considerations, though the latter are hardly irrelevant. If you look at my recent post where I reviewed one of my trades, you'll see that early in the morning I was selling the S&P 500 Index even though all of my contextual indicators said that we were in a rising market. The reason for this was that, at the day time frame, I was making the call that we were not seeing enough buying interest to sustain a move to the overnight high and would likely move back toward the prior day's pivot level. In other words, I was identifying a potential range day early in the session and keying my trade off of that information.

In my market preparation, I think about seven day structure possibilities:

1) Range Day - The market will oscillate around an average price value with relatively low volatility through the day, likely ending the day not far from its opening price level and/or its volume-weighted average price (VWAP);

2) Upside Trend Day - The market will open near its low price for the day session and build its way higher through the day, closing near its high price. The market will tend to stay above its VWAP for most of the day;

3) Downside Trend Day - The market will open near its high price for the day session and work its way lower through the day, closing near its low price. The market will tend to stay below its VWAP for most of the day;

4) Upside Breakout Day - The market will open within a range, but will build volume and attract participation at the upper end of that range, leading to a price break above the range, and further acceptance of price above the range with solid volume. An upside breakout represents a transition from range to upside trending conditions.

5) Downside Breakout Day - The market will open within a range, but will build volume and attract participation at the lower end of that range, leading to a price break below the range, and further acceptance of price below the range with solid volume. A downside breakout represents a transition from range to downside trending conditions.

6) False Upside Breakout Day - The market opens within a range and moves above the range, usually with limited participation and volume that wanes with higher prices, only to fall back into the range and return toward VWAP. A false upside breakout represents an extension of range trading conditions.

7) False Downside Breakout Day - The market opens within a range and moves below the range, usually with limited participation and volume that wanes with lower prices, only to bounce back into the range and return toward VWAP. A false downside breakout represents an extension of range trading conditions.

Why are these important structures?

In range markets and on false breakouts, you'll be trading for moves *toward* VWAP and often the prior day's pivot level. In trending and breakout markets, you'll be trading for moves *away* from VWAP and toward the R1/R2/R3 or S1/S2/S3 price levels. In other words, you'll be fading price strength and weakness in range and false breakout markets and trading with strength and weakness during trending and breakout conditions.

Without a proper understanding of market context and key price levels, it is very difficult to get a handle on day structure early in the session. You'll find yourself looking at very short-term "setups", only to miss the more basic question of whether price will move toward or away from its most recent estimates of value (VWAP, value areas). That's not to say that trading very short-term setups cannot be successful. Rather, you want to situate those setups within a broader framework and consideration of day structure, so that larger time frame market direction works for you, rather than against you.

Key to a trader's trading is recognizing these various types of days. The links below should help get you started; further posts that build on these ideas will follow.
 

vagar11

Well-Known Member
#8
Historical Observations on Day Structure: Two Worthwhile Lessons

There are three basic day structures that dominate my thinking: range days, trend days, and breakout days (which are days that start as range days, but transition to directional/trend days). I include in range days those "false breakout days" in which we peek above or below a range, only to ultimately fall back inside.

Going back to 2000 in the S&P 500 Index (SPY), we find that approximately 11% of all trading days have been outside days. These are days that move above the prior day's high *and* move below the prior day's low. By definition, an outside day comprises a false breakout, though not all false breaks occur during outside days.

Another 12% of days in SPY qualify as inside days, neither moving above yesterday's high nor trading below the previous day's low. By definition, an inside day is a range day, although broader definitions of range days are possible.

That means that approximately three-quarters of all trading days have taken out the prior day's high or low and *not* moved back beyond the opposite extreme. A whopping 88% of days have traded outside of the previous day's range. My past research finds that an even larger proportion of days will trade outside the prior day's range when volume equal to or greater than the 20-day median.

Now let's look at something different. Going back to 2000, approximately 47% of days close within yesterday's price range.

What that means is that, of the 88% of days that trade above the prior day's high or below the previous day's low, close to half will fail to stay outside that range.

The moral of the story: When you're trading in a range during the early part of the day session, watch for evidence of a developing breakout from that range. When you're breaking out from a range, watch for evidence that the break may ultimately fail. Friday's trade was a great example of both lessons.
 

vagar11

Well-Known Member
#9
Using VWAP to determine structure of the day



VWAP builds during the day, with price weighted by the volume traded at that price. As a result, an uptrending market that is attracting volume from buyers will show a smoothly rising VWAP. During such an uptrend, price will remain above VWAP and will build distance above it. Conversely, in a downtrend that is attracting volume from sellers, we will see a steadily falling VWAP. Price will remain below VWAP and will build distance below it.

We can think of VWAP as the market's emerging estimate of value for the trading day. Thus, where we trade relative to VWAP tells us whether we are shifting value to the upside or downside. In the chart above, we can see that crossovers of VWAP told us we were not trending on the day. On range days, we will oscillate above and below VWAP; fading those moves for a return to value becomes a successful trade.

Much of intraday trading consists of recognizing when we are escaping the orbit of value/VWAP to the upside or downside and when we are bound to its gravitational pull.




A review of an earlier post is in order: a market's volume-weighted average price (VWAP) reflects the average price of transactions through the trading day. Knowing where we are trading during the day relative to that day's VWAP is very helpful in identifying the kind of day that we're in.

Above is a chart of yesterday's S&P 500 e-mini index (blue line) vs. its VWAP (pink line). We opened below the market's previous day's close and oscillated around VWAP in the early minutes of trade, moving both above and below the market's opening price. Advance-decline breadth was negative, and we saw a moderate negative bias to the NYSE TICK.

Had this been a strong downtrending day, we would have seen several things:

1) Price moving away (lower) from its opening level;

2) A downtrending VWAP line, as new transactions are occurring at lower price levels and lower prices are attracting further selling volume;

3) Price stays below the VWAP line, as recent transactions are occurring at lower price levels than earlier ones and the lower prices are attracting selling volume.

The fact that we were oscillating around the market opening price for much of the first half-hour of trade was an early indication that this was not shaping up as a strong downtrending day.

Indeed, with the 9 AM CT data, we saw an upside break above the opening range on a positive shift in NYSE TICK. As a result, we traded above VWAP and VWAP displayed an upward slope. If this were going to be a solid uptrend day, we should have seen a reverse of the three conditions above: price moving away from its opening level through the day to the upside; an uptrending VWAP line; and price remaining above VWAP.

By around 9:30 AM CT, however, my short-term moving average of TICK turned below zero. Breadth was still negative in the market, not something we'd expect in a market that had shifted from a down open to a solid uptrend. The market pulled back toward its VWAP line before again marching higher into midday on resumed positive TICK. Breadth remained negative, however, and we again pulled back toward VWAP on negative TICK, before again moving higher.

There was a bullish directional bias to the day from open to close, as we can see from the generally upsloping VWAP line. The entire day, however, traded below the prior day's pivot (average price) level on negative breadth. Moreover, the day could not sustain trade above its VWAP line, oscillating above and below. What that tells us is that we had a relatively weak rally in a downtrending market.

As the earlier VWAP post indicated, VWAP can be thought of as the market's evolving estimate of value. In a weak trending or non-trending market, we will tend to move away from VWAP to probe trader/investor interest. If that interest is lacking, we will tend to gravitate back toward that VWAP value level. In weak trending markets, you want to be fading moves away from VWAP.

Conversely, in a strong trending market, we will see strong or weak breadth becoming more extreme through the day. Price will stay above or below VWAP; there will be a positive or negative slope to a Cumulative TICK line (not oscillation of a TICK moving average above and below zero); and the VWAP line itself will sustain an upward or downward slope. Those are the markets where you want to ride moves higher or lower to R1, R2, R3/S1,S2,S3 price targets.

What is the character of the day you're trading? Where we trade relative to the market open and relative to the day's VWAP will provide important clues. At the very least, it will keep you from assuming trends in weak markets and keep you from fading trending ones.
 
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